Central Bank Policy Mix: Key Concepts and Indonesia’s Experience

Abstract

Central banks’ mandates cannot merely be to achieve price stability; they should be enlarged to include promoting financial system stability. To achieve this dual mandate, central banks are advised to formulate and implement a policy mix of interest rate policy, combined with exchange rate policy, capital flow management as well as macro prudential policy. This policy mix should be further complemented with strong coordination and communication.KeywordsCentral bank policyPolicy mixBank IndonesiaGlobal financial crisis (GFC)